Hard times for hostile takeovers

* India Cements offered as much as Rs 300 for one share of Raasi Cement. But the scrip which was quoting in the Rs 50-60 region some months ago is ruling at around Rs 150. The Rajus of Raasi Cement are moving heaven and earth to prevent India Cements from taking control of their company. Both the sides have been lobbying with institutions, Finance Ministry and banks forsupport.

* Sterlite Industries’ bid to acquire Indian Aluminium (Indal) has not reached anywhere. Alcan Aluminium of Canada — the major shareholders of Indal — and Sterlite are engaged in a similar lobbying exercise. They have already come out with one round of offers and counter-offers. But Indal-Alcan combine is yet to buckle under the Sterlite pressure.

* The market has virtually ignored the bid of Autoriders to take control of Saurashtra Cement which is controlled by the N K Mehta group. Apart from the fact that the financial performance of Autoriders is nothing great, what has raised eyebrows in the market is totally different lines of business.

Autoriders, which is engaged in vehicle dealership and financing, has no experience in running a manufacturing concern, leave alone a cement company.

Strangely, financial institutions which had favourably considered takeover offers in the past have so far failed to show any inclination in selling their stakes in the target companies. IDBI, a majorshareholder in several companies, had announced that it would not assist hostile takeovers. “It is rather surprising. Will IDBI remain silent and assist a promoter who has mismanaged the company and diverted company funds? It’s true that FIs should have a developmental role, but they should have commercial considerations also. In the overall interest of the industry and to keep the promoters on their toes, it is necessary that institutions should take some bold decisions,” said a senior industrialist.

Unit Trust of India (UTI), which has a different approach towards the corporate sector, is said to be keen to dispose of its shares in Raasi Cements. UTI, the largest mutual fund in the country, stands to make a good profit in the deal. The division among institutions about the approach towards takeovers has kept the matter in limbo. The yardstick of institutions in such is still a mystery for investors. It’s only a year ago when institutions helped the Torrent group to acquire Ahmedabad Electricity andSurat Electricity.

The same institutions, it may be recalled, were silent when multinationals hiked their stakes in their Indian outfits to 51 per cent at very low prices. The boards (which included institutional nominees) of several FERA companies allowed the foreign parent to short-change the Indian investors by allowing such share acquisitions at rock-bottom prices. Even in extending loans and later restructuring them (by converting them into debentures and so on), institutions have goofed up in many companies. Similarly, institutions also looked the other way when companies like JCT diverted funds through interest-free loans to group companies.

When the market regulator SEBI formulated the takeover code with much fanfare, there were great expectations. However, nothing has happened except for some friendly takeovers and mergers. Corporate India needs more takeovers and mergers as part of the restructuring process.